Industry Academia Conference NICMAR’s Construction

on Construction Management Industry Staff College

(IACCM 2015)

Economic Analysis of
Hyderabad Metro Rail Project
Ramakrishna Nallathiga
Associate Professor
NICMAR - Pune

This presentation is based on the

research work of Post graduate December 4-5, 2015
Students supervised by me for PGP
ACM thesis at NICMAR Pune
Structure of Presentation
Introduction
 PPPs in Infrastructure Development
 Transportation Scenario in India
 Metro Rail Projects in India
Literature Review
Traffic and Transportation in Hyderabad
 Metropolitan Area
 Population Growth
 Motor Vehicle Population
 Accidents and Pollution
Economic Analysis of HMRP
 Social Costs
 Social Benefits
Conclusions
Introduction
Infrastructure is vital to a nation’s economic growth and is considered
to be the backbone on which the society is built.
Poor transport and communications infrastructure inhibit
participation of developing countries in global production networks
(Limao and Venables, 2001).
Funding constraints to construct and maintain such infrastructure has
encouraged the use of innovative mechanisms like Public- Private
Partnerships (PPPs)
PPPs have the advantage of private sector operating efficiently (using
technology and management) and thereby reducing costs. However,
public involvement is needed to ensure this happens such that it
benefits the society.
Therefore, improvement in transportation infrastructure through PPPs
is the way forward (Foster and Briceno-Garmendia, 2010).
PPPs in Infrastructure Development
PPPs broadly refer to long term, contractual partnerships between
the public and private sector agencies, specially targeted towards
financing, designing, implementing, and operating infrastructure
facilities and services that were traditionally provided by the
Government and/or its agencies (Nallathiga 2006).
These collaborative ventures are built around the expertise and
capacity of the project partners and are based on a contractual
agreement, which ensures appropriate and mutually agreed
allocation of resources, risks, and returns.
This approach of developing and operating public utilities and
infrastructure by the private sector under terms and conditions
agreeable to both the government and the private sector is the
feature of PPPs.
Transportation Scenario in India
Transport situation in most Indian cities is rapidly deteriorating
because of the increasing travel demand and inadequate
transportation system. Indian cities of all sizes are facing the crisis of
urban transport.
Large cities are facing an unprecedented growth of personal vehicles
(two wheelers and cars) and in medium and small cities different
forms of intermediate public transport provided by informal sector are
struggling to meet the mobility demands.
While researches show that the ideal modal share of public transport
should be around 70%, however it is in tune to only 35%–40% in
India's metro cities.
Growing cities, growing population and growing traffic has invariably
called for a shift from private modes of conveyance to public transport.
A glance at the world's developing nations indicates that well planned
Mass Rapid Transit Systems (MRTS) exist successfully.
MRTS Options in Indian Cities

Mass Rapid Transit Systems

Rail-based MRTS Bus Rapid Transit Systems

Sub-Urban Metro Light Rail

Rail Transport Transit System
Rail
Metro Rail Transport Projects in India
In 2009, it was decided to invest 2000 billion (US$33.2 billion) on
metro rail projects in the following ten years.
It is planned that all Indian cities having population more that 2
million will have metro rail system. Currently, rapid transit
systems operate in 15 cities and more are under construction or
in planning in several cities of India.
India is looking to create a world class infrastructure with its
existent Kolkata and Delhi Metros with the addition of Mumbai,
Bengaluru, Hyderabad, Chennai, Jaipur, and Kochi metros in the
next few years
Metro rail proposals for Pune, Chandigarh, Ahmadabad, Kanpur,
Ludhiana, Bhopal, Indore and Faridabad are being made.
Metro Rail Transport in Cities
Cost Factors
Larger the underground and elevated proposal, larger shall be the cost
involved. It is advantageous to get funding through PPP model as in
Hyderabad and Mumbai or by DMRC model by the state or the central
government as in Bangalore, Chennai and Kolkata.
Advantages and Disadvantages
Metro rail, as a cheap mode of transport, helps in low energy
consumption, is eco-friendly, averts the number of accidents, is efficient
in terms of space occupancy and provides comfort with ultra modern
coaches and modern systems like automatic ticketing, advanced
signalling systems, automatic train protection system and integrated
security systems.  
The disadvantage is the congestion on roads at the time of construction
which has to be taken care of while the cost factor as the disadvantage.
Literature Review
ASSOCHAM (2011) study focuses on the rising urban population of Indian
cities and the inefficient transit system which are inadequate to handle the
growing cities and a rising population. It gives a complete report on the
advantages of Metro Rail transit system to reduce traffic congestion and to
connect the different areas of a city with the commercial and economic
centres of a city. It gives the list of cities with potential for Metro Rail
System and also gives the impact it will have on their economic growth.

Murty et al (2006) performed social cost-benefit analysis of Delhi Metro.

They tried to measure the benefits and costs from Phase I and Phase II
projects covering a total distance of 108 kms in Delhi. The internal rate of
return on investments in the Metro is estimated as 17 percent while the
economic rate of return is 24 percent. Accounting for benefits from the
reduction of urban air pollution due to the Metro has increased the
economic rate of return by 1.4 percent.
Literature Review
Tiwari (2011) is another study that deals with Benefits of a low cost and
low carbon mass rapid transit system in Indian urban cities. The study
in detail gives the various phases of the Delhi Metro Rail project and
the shows the planning, financial and execution phases of the Delhi
Metro. The study also shows the revenue generated and the saving the
Government of India makes by successful execution of the Delhi Metro
Rail project.
 
The current study was carried out to understand the technical features
and economic importance of Hyderabad metro rail transit project as a
successful PPP project. This paper proposes to understand importance
of the project from transport and traffic conditions in the city and the
socio-economic analysis of Hyderabad metro project towards meeting
objectives.
Hyderabad Metropolitan Area
The Hyderabad Metropolitan Area (HMA) is spread over 1905 Sq
Km. This area is greater than that of other metropolitan cities like
Delhi, Calcutta, Bangalore and Chennai.
Hyderabad Metropolitan Development Authority (HMDA) is the
nodal agency for promoting planned development of the city and
the nodal agency for studying and implementing transport related
projects within the urban agglomeration.
The population of Hyderabad city grew from 0.448 million in the
year 1901 to 6.383 millions in the year 2001.
The metropolitan area comprise of the area under MCH (covering
core city), 10 municipalities and remaining parts of HUDA area.
The HMA recorded an increase in its population from 2.99 to 4.67
millions and then to 6.383 millions in 2001.
 Population Growth in Hyderabad

Source: City Development Plan of Hyderabad (2011)

 Population Growth in HMA
Constituent part of HMA Growth rate Growth rate
(1981-91) (1991-01)
MCGM 42 19
Ten Municipalities 158 72
Cantonment Board 26 19
13 Outgrowths 44 43
5 Census Towns 68 27
Panchayat areas covering Medchal, 33 109
Gandipet and Ghatkesar

Total 56 37

Source: City Development Plan of Hyderabad (2011)

 Motor Vehicle Growth

Source: City Development Plan of Hyderabad (2011)

Accidents and Pollution
Accident 1992 1993 1994 1995 1996 1997 1999 2000 2001*
Type
Fatal 312 310 337 347 342 357 380 425 214
Share (%) 18.9% 17.5% 17.5% 15.2% 14.1% 12.9% 14.7% 14.9% 1.6%
Injurious 1339 1463 1593 1932 2080 2404 2210 2422 1620
Share (%) 80.3% 81.1% 82.5% 82.5% 84.8% 85.9% 85.3% 85.1% 88.4%
Total 1651 1773 1930 2279 2422 2761 2590 2847 1834

S.No. Year Total Load (Tonnes/Day)

1 1997-1998 934
2 1998-1999 978
3 1999-2000 1040
4 2000-2001 1123
5 2001-2002 1272
Economic Analysis of Hyderabad
Metro Rail Project
Cost-Benefit Analysis (CBA) is a tool for comparing
alternate projects by reference to net social benefits that
they produce for the community as a whole.
The term ‘net social benefit’ refers to the difference
between social benefits and social costs. Benefits and costs
are ‘social’ i.e., they are measured to whom they accrue;
they are not limited to specific market transactions.
Thus, they are identified on a more comprehensive basis
than private sector evaluations. Here cost-benefit analysis
proceeds by estimating hypothetical values that reflect real
economic values. Therefore, there values are measured as
direct and indirect values.
Here, we use the CBA framework established by Abelson
(1996) for Metro rail projects.
HMRP CBA Framework
Social Cost Benefit Analysis of Metro Rail

Benefits of Metro Rail Costs of Metro Rail

Indirect
Benefits
- Traffic
Direct improvement Direct costs Indirect
Benefits - Costs
- Accident
- Time Construction - Social Costs
savings avoidance - Operation & - Traffic
- Flood
- Cost savings Mitigation Maintenance delays
- Air quality
benefits
Social Costs of HMRP
Metro Costs Amount (Crores) Percentage
Construction 5949.94 34.74
Rolling Stock 1810.85 10.6
Operating cost 4322.40 25.23
Land in RoW 1043.33 6.1
Other land 2009.58 11.73
Disturbance 498.44 2.91
Severance 1019.35 5.95
Traffic Delay 469.41 2.74
Total 17128.54 100
Social Benefits of HMRP
Metro Benefits Amount(Crores) Percentage

Rail user time 2932.46 15.97

Rail user comfort 910.7 4.99
Other time savings 3132.81 17.22
Bus cost savings 9817.35 53.9
Accident savings 764.98 3.99
Air quality 364.28 2
Flyover benefits 72.856 0.43
Flood mitigation 236.78 1.5
Total 18232.22 100
Conclusion
Mass Rapid Transportation Systems like Metro Rail are the
need of hour in most Indian cities
Metro Rail projects under PPP model offer advantage of both
public and private sectors
Hyderabad metropolitan city has been growing in terms of
population and motor vehicles and existing transportation
systems are not able to cater to it
The trend of growing high levels of pollution and accidents in
Hyderabad also underline need for MRTS like Metro rail
Hyderabad Metro Rail Project is an innovative project being
developed under PPP for improving traffic and transportation
The CBA of the Hyderabad metro rail project indicate that the
economic benefits of project outweigh its costs.
The cost-benefit ratio of 1.065 implies that the benefits are
marginally higher than its costs.